Federal Student Aid Experiences Common Audit Findings

The Department of Education (ED) recently found itself in the same boat as many schools: responding to the findings of an audit. Interestingly, many of the findings, published last week by ED’s Office of Inspector General (OIG), were the same as those typically identified at schools during audits. Findings included not resolving issues from the last audit, not adequately documenting actions, and not following established policies and procedures.

The final audit report, entitled the Audit of the Followup Process for External Audits in Federal Student Aid, detailed findings related to audit and program review closure efforts. In total, OIG made 68 recommendations to ED regarding Federal Student Aid’s (FSA) external audit processes, specifically in the area of ensuring the outside entity completed additional necessary required actions after the audit concluded. Perhaps the most troubling finding was OIG’s determination that “FSA did not sufficiently implement the corrective actions it reported taking in response to the recommendations made in our prior audit of FSA’s external audit followup process,” which occurred in 2004. This issue comes up consistently in ED’s release of the top 10 audit and program review findings for schools that participate in the Title IV aid programs; in turn, ED should be held to the same standards.

OIG performed an audit of five years of data, from October 1, 2008 to September 30, 2013, and found 36 resolved files, but only 1 closed file. A resolved file indicates that ED needs to conduct follow up to ensure the entity completed necessary corrective actions. A closed file denotes that ED verified the completion of all corrective actions, including repayment of funds or making settlements.

Within those 36 resolved files, OIG reported that 25 files (69 percent) remained in a resolved status for more than two years, and 9 of the 25 files were in that status for more than four years. The unpaid monetary recommendations for these 36 files exceeded $1.3 billion. In order to avoid occurrences like these, NASFAA’s Reauthorization Task Force in its final recommendations proposed that rules be enacted requiring ED to provide a final report for a program review within 60 days after receipt of the institution’s response.

Upon reviewing 10 files of the 36 in greater detail, OIG found seven were closed prior to the OIG audit or prior to the OIG fieldwork. Of those seven files, OIG found 26 recommendations resulting in over $20 million in financial obligations. ED could not initially document 21 of those recommendations, and ultimately nine remained undocumented, which included nearly $504,000 in unresolved financial obligations.

OIG cited a number of reasons for the ineffective follow-up process:

Administrative weaknesses in the understanding of the difference between “resolved” and “closed” status in the auditing system.

The OIG recommendations included improving maintenance and organization of documentation, conducting staff trainings, and updating policies and procedures. While FSA disagreed in part with the findings, it did acknowledge the necessity for improved processes in its response to OIG. In its response letter, FSA explained that it reorganized the audit follow-up process in January 2015, which resulted in the closing of 23 of 29 resolved audits by May 2015. Three of the remaining six resolved audits cannot be closed at this time due to extenuating circumstances.

Publication Date: 6/23/2015

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